A lucrative order at a Somerset helicopter plant has been thrown into doubt
after the Italian executives at the head of the company were arrested over
bribery allegations.

The Indian government has threatened to cancel a $750m (£479m) order to buy 12 helicopters produced by Yeovil-based AgustaWestland should an official inquiry proved the contract was secured unlawfully.

Cancellation of the deal would come as a major blow to the company, which has been pinning its ambitions on overseas sales as it loses business from the shrinking defence budget at home. It is Yeovil’s major employer, with 3,200 permanent staff and a further 1,500 sub-contractors.

A.K. Antony, India's defence minister, said the nation's Central Bureau of Investigation had been ordered to investigate the purchase of the luxury choppers, destined for use by India's political elite, following the arrests.

"If we find any evidence of corruption then we will blacklist the company and even cancel the deal," he said.

"We don't want to jump the gun... [but] we can get our money back at any stage."

Police in Milan arrested Giuseppe Orsi, chief executive and chairman of defence giant Finmeccanica - which wholly owns AgustaWestland - on Tuesday over allegations he paid bribes to intermediaries to win the Indian contract when he was head of the Somerset operation.

Italian prosecutors, who are also investigating Bruno Spagnolini, current chief executive of AgustaWestland, were reported to suspect that bribes worth around 10pc of the deal were paid to ensure AgustaWestland won the contract.

Under the terms of a deal signed in 2010, the helicopters were due to be delivered between January and July this year.

Mr Antony said that his ministry's "integrity is foolproof" while promising that the inquiry would "examine every stage of the contract" process.

An Indian foreign ministry spokesman said on Tuesday that India had received no information on the Italian investigation, while Mr Antony said his ministry's international inquiries had not yet yielded any evidence against Finmeccanica.

India's main opposition Bharatiya Janata Party said "many Indian names" were allegedly involved in the sale and accused the Congress-led government of dragging its heels in seeking to identify them.

In the 1980s a previous Congress government, led by then-prime minister Rajiv Gandhi, collapsed over charges of kickbacks paid to Indian officials by the Swedish group Bofors to clinch a $1.3bn artillery deal

India banned middlemen in defence deals following the Bofors scandal.

Finmeccanica said in an emailed statement on Tuesday that its operations "will continue as usual".

It said it was issuing the statement "with reference to the precautionary measures issued today towards the chairman and chief executive of Finmeccanica and the chief executive of the controlled company AgustaWestland".